Evaluation by Best Value for Money Methodology Procurement Division Evaluation by Best Value for Money Methodology

Best Value for Money Best value principle as per UN Financial Regulations & Rules: 5.12 Due consideration when exercising the procurement function Move from a principle to a method to apply best value in procurement Best value in procurement is a practice used world wide in public and international procurement operations Best value method involves all procurement stakeholders Requisitioner Procurement Staff LCC HCC Contract Approving Authority

Best Value for Money Requisition must describe the goods and/or service in terms of functionality, deliverable, business solution No specification or “how to do it” – Must be outcome based Procurement under best value for money method is based on pre-established criteria for evaluation with weighted scores assigned to technical and commercial evaluation Information about criteria is communicated to the vendors at the solicitation phase Range assigned to technical evaluation varies from 40-50-60% and 60-50-40% is assigned to financial / commercial evaluation Allocation is determined by market structure, objectives to achieve, professional judgment and risk assessment Market structure: from Monopolistic to Open Competition (oligopolistic)

Best Value for Money After receipt of proposal, technical evaluation is conducted by a team of staff from the requisitioning office(s) Based on the pre-established criteria, technical offers are rated with points assigned to each category of criteria The best technical offer receives the highest score

Best Value for Money For example, technical evaluation of specific equipment may include evaluation criteria such as: Pass or Fail (ISO certification) Delivery lead time (15 points) Fuel consumption rate (20 points) Warranty conditions (15 points) Noise level (10 points) Power capacity output (15 points) Global support for spare parts (25 points) Total = 100 pts and will count for 60% of the overall evaluation

Best Value for Money Financial evaluation is conducted by the Procurement Division upon completion of technical evaluation Lowest priced offer is given the maximum number of points. All other financial and commercial elements receive points in inverse proportion Total = 100 pts and will count for 40% of the overall evaluation

Technical Evaluation (60%) Commercial Evaluation (40%) Best Value for Money For example, in the scenario below, company A offering the second lowest price is the best value based on the combination of technical and financial evaluation having the highest total score Technical Evaluation (60%) Commercial Evaluation (40%) Total Score Score (A) Adjusted Score (B) Price (C) Score (D) (B) + (D) A 90.0 54.0 $230,000 38.3 92.3 B 70.0 42.0 $280,000 31.4 73.4 C 85.0 51.0 $220,000 40.0 91.0 D 88.0 52.8 $240,000 36.7 89.5

Best Value for Money Statistic In 2004 and 2005, a total of 117 tenders were processed under the best value for money evaluation method for a total contract value of $738 million - Corrigendum to paragraph 66 of A/60/846/Add.5 will be issued 117 tenders represents approximately 13% of total number of tenders issued in 2004 and 2005 Note of caution: Difference in contract award value and actual expenses (system contract) Certain contract value do not expense 100%

Conclusion Best value for money is a principle set in FR&R Best value for money, for the procurement function, is an evaluation methodology based on a systematic and transparent process which maximizes the business solution for the Organization